Audit - Audit Evidence: Theories
Audit - Audit Evidence: Theories
THEORIES
1) Audit evidence has two primary qualities for the auditor; relevance and
reliability. Given the choices below which provides the auditor with the most
reliable audit evidence?
A) general ledger account balances
B) confirmation of accounts receivable balance received from a customer
C) internal memo explaining the issuance of a credit memo
D) copy of month-end adjusting entries
3)The auditor must gather sufficient and appropriate evidence during the course
of the audit. Sufficient evidence must:
A) be well documented and cross-referenced in the audit documents.
B) be based on sources that are external to company.
C) provide evidence that prove or disprove an audit objective/assertion.
D) be persuasive enough to enable the auditor to issue an audit report.
4)Audit evidence obtained directly by the auditor will not be reliable if:
A) the auditor lacks the competence to evaluate the evidence.
B) it is provided by the client's attorney.
C) the client denies its veracity.
D) it is impossible for the auditor to obtain additional corroboratory evidence.
11. For audit evidence to be compelling to the auditor it must be sufficient and
appropriate. Which statement below is not correct regarding the appropriateness
of audit evidence?
A) The more effective the internal control system, the more assurance it provides
the auditor about the reliability of financial reporting by the client.
12.Which one of the following is not one of the primary purposes of audit
documentation prepared by the audit team?
A) A basis for planning the audit.
B) A record of the evidence accumulated and the results of the tests.
C) A basis for review by supervisors and partners.
D) A basis for determining work deficiencies by peer review teams.
B)
Selecting items with a high likelihood of misstatement The randomness of the items selected
No No
C)
Selecting items with a high likelihood of misstatement The randomness of the items selected
Yes No
D)
Selecting items with a high likelihood of misstatement The randomness of the items selected
No Yes
18. Given the economic and time constraints in which auditors can collect
evidence about management assertions about the financial statements, the auditor
normally gathers evidence that is:
A) irrefutable.
B) conclusive.
C) persuasive.
D) completely convincing.
19. Which of the following statements is not a correct use of the terminology in
relation to audit evidence?
A) Evidence obtained from an independent source outside the client organization
is more reliable than that obtained from within.
B) Documentary evidence is more reliable when it is received by the auditor
indirectly rather than directly.
C) Documents that originate outside the company are considered more reliable than
those that originate within the client's organization.
D) External evidence, such as communications from banks, is generally regarded as
more reliable than answers obtained from inquiries of the client.
20. Evidence is usually more persuasive for balance sheet accounts when it is
obtained:
A) as close to the balance sheet date as possible.
B) only from transactions occurring on the balance sheet date.
C) from various times throughout the client's year.
D) from the time period when transactions in that account were most numerous
during the fiscal period.
23.Calculating the gross margin for the current year under audit as a percent of
sales and comparing it with previous years is what type of evidence?
A) physical examination
B) analytical procedures
C) observation
D) inquiry
24.When the auditor develops supporting evidence for amounts posted to account
balances with documentary evidence, that process is called:
A) inquiry.
B) confirmation.
C) vouching.
D) physical examination.
25. An example of an external document that provides reliable information for the
auditor is:
A) employees' time reports.
B) bank statements.
C) purchase order for company purchases.
D) carbon copies of checks.